While Meta struggles with innovation and attracting younger users, at Snapchat, innovation and Gen Z users are in high supply. So why is the company struggling?
“Snap doesn’t lack when it comes to innovation,” our analyst Jasmine Enberg said on a recent episode of our “Behind the Numbers” podcast. “But there are serious questions about the health of its core business, and it really needs to focus on turning those things around.”
Here’s where it stands:
Fighting to monetize: Snapchat is primarily a messaging app, making it difficult to monetize, said Enberg.
- By some measures, Snap is healthy. The platform boasted 8 million new daily users in Q1, and time spent with Snapchat is increasing, according to our forecast.
- The platform is an innovator in AR, AI, and social media (remember, Snap invented Stories).
- But new tech and high use aren’t translating to ad revenues, which we project will decline by 1.8% this year to $2.08 billion.
Gen Z pros and cons: Snapchat is a favorite for Gen Z users, with more teens and young adults spending more time on the platform. “It’s somehow always able to squeeze daily user growth, and I think that’s a testament to its staying power among Gen Z,” said Enberg.
- But the platform has trouble attracting older users. Just 5.1% of US social media users ages 65 and older use Snapchat, and 10.1% of those ages 55 to 64 do.
- In contrast, 14.4% of US social media users ages 65 and older use TikTok, which has also historically been viewed as a Gen Z platform. Among those ages 55 to 64, that figure is 21.0%.
Snapchat is still small: At $2.08 billion in US ad revenues this year, Snapchat is behind Meta ($51.35 billion), TikTok ($6.19 billion), LinkedIn ($3.95 billion), and Pinterest ($2.24 billion).
- “Advertisers are still turning to tried-and-true platforms over smaller or experimental ones,” explained Enberg.
- Subscriptions mark a bright spot for Snapchat. Snapchat+ has more than 3 million users, thanks in part to the draw of its My AI chatbot. But the platform has a ways to go it reaches its goal of 10 million subs.
For advertisers’ consideration: “Snap introduced My AI really as an engagement play. But what I think is really interesting about it now is that it is an advertising play as well,” said Enberg.
The company introduced new AI-driven ads at NewFronts earlier this month. These spots are worth checking out because they offer insight into what AI chat search ads could look like.
Listen to the full episode.
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